Op-Ed: Force majeure declared on Libya’s largest oil field

By Pieter Scribante, Economist and Political Analyst

On July 31, the National Oil Corporation (NOC) declared force majeure on oil production at El-Sharara – Libya’s largest oil field – and on crude oil loadings at the Al-Zawiya port.

This was prompted by an illegal pipeline valve closure which hinders oil supply from El-Sharara to the port. Attempts to reopen the valve and restart production are being prevented by “a local armed group”, according to a statement by the NOC.

This is the second time in less than ten days that the NOC has halted oil production at El-Sharara, with the previous force majeure being lifted, after only a few days, on July 23. The production loss equates to an estimated 290,000 bpd or roughly $19m a day.

Oil production has remained remarkably stable over the second quarter despite events in Tripoli and was recorded at a six year high at an average of 1,155,000 bpd in 2019 Q2 (still well off the pre-2011 revolution average of around 1.6 mbpd).

The second quarter’s production signifies a 19.7% q-o-q increase on the 965,000 bpd recorded in 2019 Q1 when El-Sharara was closed for three months after being occupied by protesters.

Oil production is currently below 950,000 bpd, the lowest level since February, according to the NOC.

NOC Chairman Mustafa Sanalla stated that “This latest incident only serves to highlight the fragility of our security environment and the total disregard for the impact of such acts on the lives of everyday Libyans. The loss of production at Libya’s largest oilfield severely disrupts power supply to the grid and the continued funding of basic services. This is most acutely felt by communities in the South.”

It is unclear when the force majeure will be lifted, but Akakus Oil Operations, a subsidiary of the NOC, is attempting to reopen so that operations can resume.

This illegal valve closure raises concerns that the ‘unnamed militias’ are either trying to disrupt oil distribution, thereby reducing the revenue stream of the Tripoli-based NOC and Government of National Accord (GNA), or they are trying to bypass them altogether.

There were reports of illegal oil sales by the NOC based in the country’s east in May – which would contravene the 2016 UN Security Council resolution that designated the Tripoli-based institutions as the sole entities with authority over the sale of Libyan crude oil – but no further developments or details have emerged since.

Whether these unnamed militias are associated with the Libyan National Army (LNA) is unclear; what is clear is that the country’s oil production remains at risk.

Different armed groups are increasingly likely to take advantage of the security vacuum left throughout the country, with the LNA spread thin as it tries to take Tripoli.

The group, under the leadership of Field Marshal Khalifa Haftar, continues its assault on the UN-recognised GNA in the capital.

The fighting has claimed the lives of almost 1,100 people since fighting began in April, according to the World Health Organisation.


Partner Content

THE FUTURE JUST ARRIVED: THE ROLE OF BANKS IN A POST-COVID WORLD

THE COVID-19 GLOBAL pandemic has brought forward the future. It has brought about humanity’s biggest challenge in a century, to choose between...

Mauritius-Africa, a partnership for shared prosperity

By: Mathieu Mandeng In the current complex and challenging circumstances that are testing the...

VIRTUAL VDJ EXPOSES LOCAL CREATIVE AND ENTERTAINMENT INDUSTRY

The City of eThekwini pulled out all stops to give fans of the annual Vodacom Durban July (VDJ). The Virtual Vodacom Durban...

GAUTRAIN – Why It Matters

Economic growth continues to be one of the focus areas for the Gauteng Provincial Government (GPG) and the Gautrain responds to that...

Trending Now

Snap ! Kodak shares plunge after U.S. blocks $765 million loan deal

(Reuters) - Shares of Eastman Kodak Co (KODK.N) fell about 40% on Monday and were on track for their worst single-day decline...

COMMENT: How Africa should used data and digital to protect itself.

Health is an investment in a nation’s wellbeing and a vehicle for national value creation. Healthy girls and boys go to school, healthy women and men contribute to society, live longer and lead more productive lives. Healthy people are able to save financially, vaccinate their children and do not place added strain on a country’s health infrastructure. There is a direct benefit to investment in healthcare and unlocking economic growth. If only it was that simple.

Wall Street mixed with stimulus in focus; Dow hits over five-month high

All three indexes opened higher after U.S. President Donald Trump signed executive orders that partly restored enhanced unemployment benefits after talks between the White House and top Democrats in Congress about fresh stimulus broke down last week.

What’s Next For The U.S. Economy: Jeffery Sachs

Economist and best-selling author Jeffrey Sachs says a geopolitical Cold War with China would be a “dreadful mistake.” He explains how globalization will persist as societies and workplaces move online and urges policymakers to come together to t

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

- Advertisement -